ARMs Need A Hard Look

By

Ruth Simon

Updated Feb. 12, 2006 12:01 a.m. ET

Mortgage lenders, looking to boost profits as the mortgage boom cools, are encouraging borrowers with adjustable-rate mortgages, or ARMs, to refinance into fixed-rate loans. It's a move well worth considering -- but carefully, because it won't make sense for everyone.

The rates on fixed-rate mortgages exceed those on ARMs by a narrower margin than they used to, because short-term interest rates have moved up faster than long-term rates. Currently, a 30-year fixed-rate loan carries an average rate of 6.39% versus 5.46% for...